Mr Farron said some UK reaction to the end of the restrictions was "racist".

He said Tory "panic" about the UK Independence Party had led to a "ridiculous stoking of fears". He added: "We are being watched. The picture from the Tory side of the Coalition is not pretty. A report showed we are heading to be the largest economy in Europe.

"A lot of that is down to us embracing the open market. It is economically stupid to make the fuss the Tories have been making. I would not necessarily call it racism but it is ugly and stupid."

Mr Farron spoke after Romanian Foreign Ministry spokeswoman Brandusa Predescu told the BBC: "We see headlines that sometimes really are close to racist. The target is the Romanian citizens supposedly invading Britain."

She insisted: "The UK is not even the preferred destination for Romanians."

Philippa Roe, leader of Conservative-run Westminster City Council, admitted she had "no idea" how many Romanians and Bulgarians might come to the UK.

But she still predicted there would be an increase in "massive disruption and low-level crime" caused by a "minority" of Roma beggars in London.

She said new rules that force migrants to wait three months before claiming benefits are not tough enough. Mrs Roe's remarks came as an all-party Parliamentary group urged politicians "not to stoke community tension".

Business chiefs also warned that David Cameron had allowed anti-immigration feeling to take hold while ignoring the economic benefits.

Migration expert Professor John Salt said there was no evidence workers will flock here or be health tourists.